Bank fight

Hey there, time traveller!
This article was published 22/05/2021 (1627 days ago), so information in it may no longer be current.

Of course you know, this means war.

Or rather, RBC’s latest product offering for everyday banking—chequing and savings accounts and all the other products — is another shot across the bow of the other big five banks, credit unions and other financial institutions fighting to manage our money.

Called RBC Vantage, the highlight of this umbrella structure, covering everything from chequing to TFSAs, is its rewards program for debit transactions.

Of course, if you ask RBC, Vantage is so much more: “It represents our biggest ever, most comprehensive value-proposition and offering for clients that relates to everyday banking,” says Erica Nielsen, senior vice-president of banking and client growth at RBC.

“And it really reflects the cumulative benefits when you bank with RBC.”

The program — which includes no-fee chequing accounts, provided you sign up for a credit card and another account — is founded on focus group insights. What Canadians told the bank is that they generally feel a like an emotionally neglected spouse in the client/bank relationship.

RBC got the message, Nielsen adds: “It really meant, ‘How do you (the bank) recognize me every single day; how do you recognize me as my relationship grows with you, and how do you make me feel respected for the business I bring to you?’”

The campaign couldn’t have had better timing, given the results of a recent JD Power survey of Canadian consumers’ attitudes about banks.

Its Canada Retail Banking Satisfaction Study found the reputation of the big five banks — CIBC, RBC, BMO, TD Canada Trust and Scotiabank — took a hit during the pandemic.

“We clearly saw a change in satisfaction,” says John Cabell, director of banking and payments intelligence at JD Power.

Overall satisfaction, measured on a 1,000-point scale, fell to 787 from 790 due to a six-point decline among the big five clients while mid-sized banks — Simplii Financial, Tangerine Bank and ATB Financial — saw a 12-point rise in satisfaction.

“There is really this negative halo that many customers have had with their experience,” Cabell says about latest survey findings regarding the big banks.

“It’s often with the kind of things you could guess: ‘I had a long wait on the telephone to get to a representative,’ or ‘I am having problems with fees where they are costing me money whereas before I haven’t had problems.’”

Most banks are more than happy to fix theses problems, and generally have been very accommodating during the pandemic. For some Canadians, however, having to call, email or virtual chat with their bank to fix a glitch is a headache they would rather not have.

In contrast, mid-sized banks are online-based to begin with, so clients were already used to managing money online — and prefer email and texting over face-to-face, says Cabell.

But the big five banks, “likely, you had a lot of customers using (online and mobile) channels who didn’t want to be there.”

Mid-sized banks often have another advantage: no-fee banking, says Stephen Weyman, founder and CEO of HowToSaveMoney and creditcardGenius, websites tracking financial products.

He notes Tangerine and Simplii Financial have strong reputations for offering “great service for no-fee banking.” Both happen to among the highest rated in the JD Power survey.

What’s also interesting is Tangerine is owned by Scotiabank, and Simplii by CIBC. So one might ask: Why don’t CIBC and Scotia just offer no-fee banking or, for that matter, all of the big five banks do that?

In actuality, all do, providing you meet certain criteria. For example, Scotiabank’s Basic Plus Bank Account charges $11.95 a month, or no fees if you have at least $3,000 at the end of each day for the month.

Weyman notes RBC’s Vantage program is notable because unlike the other “bigs,” its Day to Day Banking chequing account waives its $4 monthly fee if you have two other products with RBC (i.e. mortgage and credit card) and your use the account monthly to do at least two of the following: bill payments, direct deposit or pre-authorized payments.

“If you’re looking at the whole package, it is a pretty compelling offering,” he says, adding RBC also offers free AirPods for signing up, and meeting other criteria.

Yet if you’re still wondering why not just offer a bare-bones, free chequing account and devour the competitors’ lunches, Weyman says the big banks have no intention of starting a “race to the bottom.”

Much like telecoms, the banks are oligarchies fighting over a limited number of clients. And the formula has worked well because they are highly profitable. (That success, by the way, powers the returns in millions of Canadians retirement portfolios.)

As Weyman puts it: “Everybody needs a bank account and most of us already have one, so it’s not like there are new customers out there to chase after.”

Still, big five banks are constantly fighting to win over new customers from competitors while keeping existing ones happy so they don’t go somewhere else.

But a straight-up no-frills, no-fees, no strings attached chequing account?

For the time being, that remains the mid-sized banks’ game.